Monday, October 30, 2006

Room at the Top: There's a huge vacant lot for sale on West 72nd Street. No, up there!

New York Magazine
By S.Jhoanna Robledo
October 30, 2006

Traditional co-ops are leery of decisions that will disturb residents—approving ambitious construction work, for example. Then again, the Franconia isn't particularly traditional. Decades ago, mobster Arnold Rothstein ran his business from this building, brokering a deal here (known as the Franconia Treaty) with another branch of the Mob. And despite its brass-and-marble lobby and dreamy address (across from the Dakota), "it's a classy joint but … not a 'Good morning, sir' kind of building," says board president David Wineberg. And it's groundbreaking, even: The Franconia hopes to be the first co-op to sell its rooftop for such a high price. The board is asking $8.7 million.

Rooftop penthouses have been added to buildings before, cake-topper-style, but usually by individual homeowners who want to expand upward. This deal is different, because shareholders are inviting outsiders to buy and build. To a point, anyway: It's in a designated historic district, so the structure can't be visible from the street, meaning it has to stand ten feet back from the parapet and rise no higher than two stories. Bottom line: The buildable space amounts to 4,000 square feet.

Why the gamble? In 1993, explains Wineberg, the cooperative took out an unusually rigid mortgage that couldn't be paid down partially, refinanced, or split up. (Residents would like to convert the building into a condo, and the loan precludes that.) It also prevented the co-op from taking on extra debt, requiring punishingly high monthly charges. With thirteen years to go on the loan, the board wanted out, and to do so it had to pay off the mortgage entirely, all $8 million–plus of it. "They're not doing it for a profit," says listing broker Elie Khen of Bellmarc Realty. "Each dollar is spoken for."

Still, $8 million will buy a fully finished townhouse in the area, so will someone bite? "It's the location," says broker-architect Moriah Kosch, who's consulting on the deal. "To be able to customize with these views"—the building peeks into Central Park—"is a rarity." Wineberg says most residents are onboard, despite the headaches ahead. After all, if they get the asking price, their maintenance charges could be cut in half. "They see the dollar signs," he says.

Thursday, October 26, 2006

Is There a Time Limit on Collecting Late Fees?

October 26, 2006
Q & A

Q I serve on my co-op's board of directors. We have a apartment owner who is consistently late with her maintenance fees. Although she eventually pays her base charges, the late fees have accumulated to more than $1,000. Should the board be concerned about a statute of limitations?

A "Collecting late charges from co-op shareholders is a common problem, as the amounts are generally small and collection proceedings are expensive," said Elliott Meisel, a Manhattan co-op and condo lawyer. He noted that the oldest late fees may be deemed part of a "continuing performance obligation," and in that case, the six-year statute of limitations begins to run after the last charge was imposed.

"The safest course for the co-op is to apply all payments made by the shareholder against the oldest outstanding amounts due," he said, "allocating any remaining arrearages against the current maintenance charges, and making it clear, in writing, that any unpaid balance consists of all or a portion of the most recent charges."

Address questions to Real Estate Q&A, The New York Times, 229 West 43rd Street, New York, N.Y. 10036, or by e-mail to: Answers can be given only through the column.

Sunday, October 1, 2006

Can a Board Restrict The Use of the Roof?

The New York Times
October 1, 2006

Can a Board Restrict The Use of the Roof?

Q -- We own a co-op apartment on the top floor of a town house. When we were shown the property, the broker told us we could use the roof above the apartment. During our interview with the co-op board president and his wife, the wife said that she used to go up there ''to sun with the children.''

Three years later, the board president issued a letter stating that the building's insurance policy restricts the use of the roof to emergencies and that it must remain closed at all other times. We have asked to see a copy of the directive from the insurance company but have had no response. What can we do?

A -- Arthur I. Weinstein, a Manhattan co-op lawyer, said that a co-op may adopt rules that limit or prohibit use of a common area for any cause that the board deems reasonable. ''This can include insurance requirements, structural limits of the roof or the inappropriateness of the roof surface for walking, furniture or plantings,'' he said.

Mr. Weinstein noted that comments made by a broker or a board member's wife are not binding on the co-op and do not limit its right to change its rules.

He noted that the only circumstances under which a court might review the reasonableness of the board's decision would be if the proprietary lease or offering plan made it clear that the letter writer had exclusive rights to use the roof.

Assessments Can Affect the Tax Basis

The New York Times
October 1, 2006

Q -- Can regular monthly payments that are made along with common charges but are listed separately under Capital Reserve Fund be used to increase the tax basis for a condominium when calculating capital gains?

A -- Martin M. Appelbaum, a certified public accountant in Manhattan, said assessments levied by a condominium board for capital improvements, whether paid as a lump sum or in monthly increments, can indeed be used to increase the tax basis of individual units, thus reducing the profit when the apartment is sold.

This assumes that the board has complied with Internal Revenue Service guidelines. Mr. Appelbaum said that under I.R.S. regulations affirmed in numerous court decisions, the board must pass a resolution and notify unit owners that the funds being raised will be used for capital improvements only and not for operating expenses or ordinary repairs.

In addition, he said, there should be a separate line item on the monthly bill for the capital assessment. And finally, he said, money collected for the capital assessment should be held in a different account than the one used for other funds collected by the condominium.

"The condo board should consult with its C.P.A. firm to ensure they are following the proper procedure for billing and collection of the funds," Mr. Appelbaum said.